Do you have an infant? If you do, her share of the government debt is now $45,000. By the time she can read this article, it will have grown to at least $70,000. Worse, when she becomes a tax-paying adult, her share of the debt will far exceed her first mortgage, assuming the government leaves any money on the table for others to borrow.
In A Modest Proposal, Jonathan Swift advocated eating Irish children, both to relieve a raging famine and to keep them from becoming a future burden on the state. Today, rather than trying to save the state from the children, I propose a method of saving the children from being devoured by the state.
#ad#The Obama administration’s budget proposal will add over $1.5 trillion in debt this year alone. If further deficits persist in line with projections, this administration will add more to the national debt than all previous presidents combined. Every congressman knows that adding $1.5 trillion a year to the nation’s debt cannot be long sustained. Yet congressional Republicans’ budget proposal, which would trim a mere 5 percent off the projected deficit and just 1 percent off the total budget, is meeting a firestorm of political protest from Democrats. And even Republicans are apparently willing to let the remaining $1.44 trillion in deficit spending stand, and have shown very little backbone in addressing entitlements.
It is time to face facts. Congress is addicted to spending. For too many lawmakers, the main reason for being in Congress is to spend other folks’ money. But the problem is deeper. For thousands of entities, congressional largesse is as necessary as oxygen. Each and every one of them will fight to the death for every possible cent. Put simply, they want the money more than the average American wants to keep it from them.
If we are to believe the evidence before our eyes, Congress is incapable of bringing an end to the nation’s fiscal hemorrhaging. Neither Congress nor the executive will ever marshal the courage to do what is necessary, at least before the final catastrophic fiscal collapse arrives.
Unfortunately, the root cause of our fiscal dilemma lies within our Constitution. In one of the Founding Fathers’ rare errors, they failed to place any practical checks on the federal government’s spending or taxing powers. With fresh memories of the government’s penury during the Revolution and under the Articles of Confederation, the Founding Fathers wanted to ensure that the new United States government would never lack the necessary funds to “provide for the common defense and promote the general welfare.” Since then, as long as Congress could plausibly claim that a tax or spending measure served to improve the “general welfare,” the courts have been reluctant to interfere. In fact, if the last Congress had implemented a single-payer health-care system, supported by taxes, instead of the individual mandate, it is doubtful that any court in the land would question Obamacare’s constitutionality.
But taxes are a a dual-edged sword. As Daniel Webster argued in one of the Supreme Court’s most famous cases, “An unlimited power to tax involves, necessarily, a power to destroy.” Of course, Webster never foresaw that the federal government would one day turn its taxing powers against the nation’s economy. But that is exactly what is happening today. In its never-ending quest for revenues to support runaway spending, Congress is draining the economy of its very lifeblood -- capital.
Despite agreeing that economic growth is the cure for unemployment and our only guarantee of future prosperity, Congress and the administration continue to add burdens onto a struggling economy. Propelled by the Keynesian fantasy that every dollar the government spends is adding half as much again to the economy, Congress is spending trillions to pull us out of economic stagnation. They persist in this belief despite recent research demonstrating that every dollar Congress spends destroys 40 cents of wealth. After close to $10 trillion in federal spending in just a bit over two years, unemployment remains stubbornly high and economic growth is anemic.
#page#This state of affairs is easily explained: Governments have no money. Every penny government spends has to be taken from citizens and out of the productive economy. The government’s assumption is that it will spend this money more wisely than individuals or business. The evidence says otherwise.
Simply put, the priorities of the American people as expressed in the 2010 elections, and those of their elected officials, are misaligned. Americans want a growing economic pie, while Congress is myopically focused on taking for itself as much of the current pie as possible. Short of a national bankruptcy, the only chance we have of aligning these interests is a constitutional amendment limiting the spending and taxing power of the federal government.
#ad#Sounds impossible, but there may even be a simple way to do this. As the graph below demonstrates, no matter what the tax rate, individuals adjust their behavior to limit government revenues to under 20 percent of total GDP, with an optimal amount being about 18 percent. Furthermore, since the end of World War II, this country has been most prosperous when the government limits its spending to under 20 percent of GDP. In fact, until recently, it was rare for government spending to exceed this threshold.
A constitutional amendment limiting expenditures to 20 percent of GDP would put an immediate brake on runaway spending. However, as Congress has demonstrated a remarkable degree of cleverness in getting around pay-as-you-go rules, we must assume they will be equally clever in avoiding constitutional spending limits. It is easy to envision Congress employing tricks that move trillions of dollars off the federal balance sheet so it is not counted as “true” spending. Therefore, this same amendment would also place a 20 percent of GDP limit on revenue collection. This would have the same effect as cutting up the credit cards.
It is difficult to run massive deficits if creditors know there are limits to how much the government can extort so as to pay off what it owes. By attacking the problem on both ends -- spending and revenues -- government’s needs will finally be aligned with those of the citizenry. Congress and the administration, knowing that they could increase revenues and spending only by growing the pie, would focus with laser intensity on passing laws and implementing policies to do so. Such an amendment should, however, have enough flexibility to meet an unknowable future. For instance, in the event of a national emergency, such as a major war, Congress, by way of an annual two-thirds vote of both houses, will be permitted to collect and spend whatever is required to see the country through the crisis.
If Congress cannot find within itself the restraint to live off 20 percent of a $15 trillion economy then the American people must do it for them.
--- Jim Lacey is the professor of strategic studies at the Marine War College and author of the forthcoming The First Clash.
Read More... [Source: No Title]
No comments:
Post a Comment